Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Daytrading Canadian stocks in Realtime -- Ignore unavailable to you. Want to Upgrade?

To: le_commandant who wrote (54144)	10/18/2001 9:36:57 PM
From: bigbuk	Respond to of 62347

BBD fans enjoy POSTED AT 4:12 PM EDT Thursday, October 18 Bombardier should lose world trade ruling Interactive • Stock Quote/Chart: Bombardier Embraer By MATHEW INGRAM Globe and Mail Update Sources say Bombardier is about to lose out in a key ruling by the World Trade Organization — a ruling that will find Ottawa was wrong to provide low-rate loan guarantees so Bombardier could land an order from Air Wisconsin. Will that end the interminable battle between Bombardier and its Brazilian foe Embraer? Not even close, although it probably should. Whatever the WTO says will likely be appealed — described no doubt, as an unreasonable infringement of Ottawa's right to help foreign trade — and if the global trade authority hands down some form of remedy, that too will naturally be appealed as an unreasonable response. And so it goes. International trade lawyers and lobbyists will continue to be the main beneficiaries, and Ottawa and Bombardier will remain joined at the hip. Fans of the Montreal-based airplane maker would like to think Ottawa's assistance for Bombardier is completely reasonable and necessary. After all, if it didn't provide cut-rate loan guarantees for the company's potential customers — and other benefits through the secretive "Canada account" of the Export Development Corp. — then Embraer would get those deals, since it also gets loan guarantees from its government. To which the only rational response is, or should be, so what? So Embraer wins a big jet contract with some American airline. That's the way things go sometimes. Other businesses would move on, or perhaps try to enhance their competitiveness in other ways. Only in a co-dependent relationship like the one Bombardier has with Ottawa would a company expect the government to up the financial ante on its behalf, and only in that kind of relationship would the government respond as willingly as it does. As a result, Bombardier has such a split personality — part competitive, part aid-dependent — that even CEO Robert Brown can't keep it straight. Two weeks ago, he said the aerospace industry shouldn't expect help in the aftermath of Sept. 11. "We're the ones that have to control our own destiny," he said. "This is an unusual circumstance, but it's no different from any other general business problem." He quickly added, however, that Ottawa still needed to take action to "ensure a level playing field." Ah yes, there it is — the "level playing field" argument. This is the theory that export subsidies are justified if they help small or disadvantaged companies compete with larger international ones. There's just one problem with that rationale: Bombardier doesn't even come close to fitting that description. It is (thanks to past government largesse) a massive and financially healthy business with a dominant position in the market for regional jets, as well as several other profitable business units. Whatever our trade officials pretend to believe in front of the WTO, Brazil has a better claim to the use of export subsidies for Embraer than Canada ever will for Bombardier. Embraer is exactly the kind of company that deserves to get assistance in attracting international customers: It is still a relatively new player in an industry dominated by larger companies — companies such as Bombardier — and Brazil is still a relatively fragile economy, dealing with a host of problems Canada doesn't have. Even Air Canada probably has a better short-term case for federal subsidies, since it is skirting the edge of insolvency. Bombardier isn't even close to that kind of desperate position — it wants the subsidy train to continue because it always has, and having it is now built into its business model (and its share price). In fact, one of Air Canada's biggest supporters in its plea for financial assistance is likely to be Bombardier, which wants the government to help the airline buy more planes. Even Mr. Brown himself has supplied ammunition for the argument that his company doesn't need more subsidies: He said recently that regional jet traffic has been holding up pretty well in the wake of Sept 11. Some analysts have even said Bombardier could find more customers, since executives might prefer to buy or lease their own jets rather than take commercial flights. Mr. Brown also said the aircraft business is not as crucial to the company as it used to be, since its rail operations have grown. In that case, maybe Bombardier should give back some of the federal aid it has received over the years — but the chances of that happening are even smaller than the chance that Ottawa will ever drop the trade war it continues to wage with Brazil on Bombardier's behalf.